The importance of accounting records or an accounting system is the core of a business. Let’s admit it… at the end of the day, it comes down to numbers. The top three advantages of having a reliable accounting systems (which you’re depriving your business of when you don’t) are:
1. Providing an accurate historical account of past events
Providing an accurate historical account of past events allows you to put your emotions aside and have much more than your memories alone, adding factual data to your resources. It is hard to decide on the future without a reliable account of the past.
2. Providing the basis for reliable budgets and forecasts
The more accurate the historical data, the more reliable the predictions. The best budgets take into account external factors as well, which can vary according to the Nature of the business and the country’s socio-economic dynamics, but the starting point (and most important) is always the report of cost and income behavior over the past periods.
3. It will keep you out of trouble
According to South Africa’s Companies Act Section 24, every company must keep for 7 years (unless the company has existed for a shorter time) at the company’s registered office, all its books and records, including minutes of meetings, securities register and Memorandum of Incorporation, but chiefly the records of the day-to-day operations of the business.
Some of the most familiar justifications for postponing the implementation of an accounting system are illustrated below. We will do our best to address each of the justifications, shining light both on the business and on the legislative aspects involved:
It is too expensive: perhaps a paradigm shift is necessary in this regard. Instead of looking at it as an expense, have you tried looking at it as an investment? An investment in your business, which you believe in, that will save you admin time and costs, allow you to have the next level of insight into your business, keep you in good terms with the law makers and give you peace of mind.
My business doesn’t have enough transactions to justify it: an accounting system ought not to be a by-product of trading, but the strong foundation that holds your business steadfast, letting you know at every step of the way where you stand.
It is too complicated for me to understand, I prefer my Excel sheets: with that mindset, your business won’t be making huge leaps in the near future either. We live in a world of innovation and fast-paced technological upgrades. Not to say you must leave alone the methods which have helped you get where you are, but you should allow yourself to grow with your business and learn the tools which will help your business stay competitive and relevant in these current aggressively competitive times.
If I keep records, SARS will have evidence to charge me more tax: perhaps. But let us challenge that view. Actually, most people pay more tax for the failure of accurate record keeping. Unreliable accounting records might result in a business being selected for an audit by SARS. In that case, SARS will estimate the tax you ought to pay based on the records provided, bank statements, and any other verified income pertaining to the business. It is then the business’ responsibility to dispute SARS on the matter. That can be a very long, strenuous, time consuming, and often expensive process. Trust us, it’s not worth it.
I already know everything that is happening in my business: that’s very probable, however think of how much more of yourself you could be giving your business, if you had a centralized record keeping system and could save all that time invested in secretarial and administrative duties. You could be doing what you should be doing, engaging with clients and brainstorming ways to grow your business. How much is your time worth? What does your business’s growth and prosperity matter to you? And lastly, what will happen to your business if something happens to you? Would somebody be able to cover for you if you were in hospital? Having your business’ transactions and dealings in your mind instead of properly recorded poses a significant but unnecessary and easy to mitigate business risk.
It is each entrepreneur’s responsibility to continually learn; and accounting is the language of business. Minimum understanding is required. The proper way to see yourself, is as an ‘asset’ to your business. And the more you learn and grow, the higher your value to the business and those around you. Increasing neuroplasticity can be achieved in a few ways, including meditation, travelling, and physical exercise (I recommend martial arts). As an asset to your business, you should help yourself remain in top performance state. That goes for both body and mind. The Creative Brand department specializes in the third pillar of any business, marketing and branding; this pillar is growing important by the day, with the almost surreal migration of dealings to the internet. Understanding how to communicate with our clients, how to present our business and ourselves, is as important as being able to perform the work. If in need of help, don’t be ashamed of searching for it, if you believe that your business is worth the investment. The Alchemist Group provides a combination of services that help sustain all the three pillars of a business. Our team of professionals can tackle any challenge, and we specialize in providing critical services that companies and private entrepreneurs would need to start and run a successful business. Optionally, take the steps to empower yourself. Invest in an accounting system, draw a yearly calendar of submission dates to avoid unnecessary penalties, and keep learning.